Yellen becomes first woman to lead the US central bank in its 100-year history

Janet Yellen, a key force behind the Federal Reserve's unprecedented and controversial efforts to boost the US economy, has been confirmed by the Senate to lead the central bank just as it begins to unwind that stimulus.

When she succeeds Ben Bernanke, whose second four-year term as Fed chairman expires on Jan. 31, Prof Yellen will become the first woman to run the Fed in its 100-year history and just one of a handful of women heading central banks globally. She is currently the Fed's vice chair.

The vote to approve her was 56-26. Ms Yellen won resounding support from Democrats, but many Republicans voted no.

After the vote, president Barack Obama released a statement welcoming her confirmation.

"With the bipartisan confirmation of Janet Yellen as the next Chair of the Federal Reserve, the American people will have a fierce champion who understands that the ultimate goal of economic and financial policymaking is to improve the lives, jobs and standard of living of American workers and their families," he said.

The Fed cut overnight interest rates to near zero in late 2008 and has quadrupled its balance sheet to more than $4 trillion through a series of massive bond purchase programs meant to push down longer-term borrowing costs.

Ms Yellen, 67, spent years defending those efforts, arguing both as Mr Bernanke's deputy and before that as head of the San Francisco Federal Reserve Bank that they would reduce borrowing costs and spur hiring and economic growth.

Now those policies appear to be working: the US unemployment rate fell in November to a five-year low of 7 per cent and the economy grew in the third quarter of 2013 at its fastest pace in almost two years.

Prof Yellen's main task in the world's most powerful financial post likely will be to navigate the central bank's way out of its extraordinary stimulus, beginning with dialing down its bond-buying program.

In December, Mr Bernanke began the process, leading the central bank to its landmark decision to shave the bond purchases to $75 billion this month from a previous monthly pace of $85 billion.

The entire program, known as QE3 because it is the Fed's third such effort at so-called quantitative easing, will likely be shuttered by late 2014 so long as the economic recovery proceeds as forecast, Bernanke said.

Many Republicans and several of Ms Yellen's own Fed colleagues see the wind-down of that program as long overdue and warn that the buildup of bonds on the Fed's balance sheet could stoke inflation or asset-price bubbles.

Those concerns notwithstanding, analysts by and large expect Ms Yellen to stick with the "dovish" approach to policy that she has long been known for, with a focus on reducing unemployment, particularly if inflation continues to run well below the Fed's 2 percent target.

Ms Yellen has long argued that the Fed should tolerate slightly higher inflation if that is the cost of fighting high unemployment. But she has also advocated interest rate increases when she felt the threat of inflation called for them.

"She is a strong person but she is also one who is open to other people's opinion and learns quickly," said Bill Rhodes, president of William R. Rhodes Global Advisors and a former senior vice chairman at Citigroup. "I think there has been a tendency to underrate her ability, frankly."

Ms Yellen is the first person appointed to an initial term as Fed chair by a Democratic president since Jimmy Carter named Paul Volcker to head the US central bank in 1979. Her rise to the top of the world's most influential central bank marks an important milestone for women, long under-represented in the field of economics and finance.

"She is breaking an incredibly important glass ceiling," Terry O'Neill, president of the National Organization for Women, a liberal group that advocates for gender equality, told Reuters.